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3 Cards in this Set
- Front
- Back
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What does the diagram look like? |
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What is the substitution effect? |
The Substitution effect states that a higher wage makes work more attractive than leisure. Therefore, supply increases as people are will to work longer hours. |
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What is the income effect? |
The income effect states that a higher wage means workers can achieve a target income by working less hours. Therefore, because it is easier to get enough money they work less. |
